Case Name: Bhayani, et al. v. The JAM Partnership, et al.
Case No.: 2010-1-CV-167490

This is a class action for violation of Civil Code section 1950.5, which governs the collection and use of security deposits in residential leases. The named plaintiffs Rita and Sachin Bhayani, Santosh Patankar, and Dhanunjay and Usha Vallamdas (collectively, “Plaintiffs”) allege that they are either naturalized American citizens of Indian descent or legal permanent residents of the U.S. who are citizens of India and were former tenants at Remington Grove Apartments (“RGA”) who did not receive an accurate move-out inspection, an accurate and prompt accounting of security deposit deductions and alleged damages, and all or a portion of their security deposits to which they were entitled under the law.

Plaintiffs sue defendants JAM Limited Partnership and its general partner Stephen J. Pavlina, Jr., SV JAM, L.P., and PAV-JAM L.L.C. (collectively “Defendants”) as individuals and entities with ownership interests in RGA. Plaintiffs allege that Defendants failed to conduct accurate inspections and reports of those inspections for tenants preparing to move out as required by law, failed to provide security deposit dispositions to former tenants promptly as required by law, imposed charges and security deposit deductions for normal wear and tear and damages not caused by the tenant, retaliated against tenants who exercised their rights under Civil Code section 1950.5, refused to refund security deposits and charged additional money based on false and fraudulent reasons and intimidated tenants and former tenants by filing or threatening to file frivolous and groundless lawsuits in connection with the return of security deposits. Plaintiffs further allege that Defendants have engaged in a pattern, practice or policy of discriminating against tenants and former tenants of Indian national origin. The Complaint asserts seven causes of action under: (1) Civil Code section 1950.5; (2) Business and Professions Code section 17200 et seq.; (3) fraud; (4) unjust enrichment; (5) the Federal Fair Housing Act (“FHA”); (6) the California Fair Employment and Housing Act (“FEHA”); and (7) the Unruh Civil Rights Act.

Trial began on March 17, 2014. The case was submitted to the jury on April 10, 2014, and on April 15, 2014, the jury returned a unanimous verdict, finding that Defendants violated Civil Code section 1950.5 and were guilty of fraud. The jury found no violation of the Fair Housing Act, California Fair Employment and Housing Act, and Unruh Civil Rights Act, or breach of contract as to the named Plaintiffs. The jury awarded compensatory damages of $173,171 in connection with the section 1950.5 and fraud claims. The jury further found that Defendants’ violation of section 1950.5 was in bad faith and awarded the Class additional damages of $346,342. On April 16, 2014, the jury awarded the Class $1,566,393.90 in punitive damages. On December 11, 2015, the Court awarded $1,286,423.10 in attorney’s fees to Plaintiffs.

Following informal negotiations and a mediation session on March 17, 2016, with Judge Rebecca Westerfield, the parties have now reached a settlement and have filed a joint motion for preliminary approval of the settlement.

A. Legal Standard

Generally, “questions whether a settlement was fair and reasonable, whether notice to the class was adequate, whether certification of the class was proper, and whether the attorney fee award was proper are matters addressed to the trial court’s broad discretion.” (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 234-235, citing Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794.)

In determining whether a class settlement is fair, adequate and reasonable, the trial court should consider relevant factors, such as “the strength of plaintiffs’ case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through trial, the amount offered in settlement, the extent of discovery completed and the stage of the proceedings, the experience and views of counsel, the presence of a governmental participant, and the reaction of the class members to the proposed settlement.”

(Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at pp. 244-245, citing Dunk, supra, 48 Cal.App.4th at p. 1801 and Officers for Justice v. Civil Service Com’n, etc. (9th Cir. 1982) 688 F.2d 615, 624.)

“The list of factors is not exclusive and the court is free to engage in a balancing and weighing of factors depending on the circumstances of each case.” (Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at p. 245.) The court must examine the “proposed settlement agreement to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.” (Ibid., quoting Dunk, supra, 48 Cal.App.4th at p. 1801 and Officers for Justice v. Civil Service Com’n, etc., supra, 688 F.2d at p. 625, internal quotation marks omitted.)

The burden is on the proponent of the settlement to show that it is fair and reasonable. However “a presumption of fairness exists where: (1) the settlement is reached through arm’s-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.”

(Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th at p. 245, citing Dunk, supra, 48 Cal.App.4th at p. 1802.)

B. Analysis

i. The Proposed Settlement

The terms of the settlement are as follows. Defendants will pay $604,312 into a class fund for distribution for class members. This amount was reached by adding the amount awarded by the jury ($519,513) to the interest awarded by the Court ($24,799) and an additional $60,000. Each class household will receive the following payments from the fund: (1) a refund of the amount that RGA deducted and charged, if any, for “repairs and cleaning” after move-out; (2) interest as calculated by the Court’s order dated December 8, 2014; (3) an equal share of the remaining money in the fund (estimated to be approximately $1000 per household). Defendants will also pay a total of $57,500 to the five people who served as class representatives throughout the litigation. Defendants will pay $25,000 for claims administration costs. Additionally Defendants will pay $1,286,423 in attorney’s fees and $37,490 in costs. The attorney’s fees will be paid directly by Defendants and will not come out of the class fund.

Aside from the additional $60,000 that Defendants have agreed to pay, all of the amounts in the settlement were previously approved by the Court. This makes it more evident than is normally the situation in class action settlements that the settlement is fair. Further, Plaintiffs and Defendants have each filed notices of appeal. The settlement eliminates the time, expense, and uncertainty associated with the appeals. Therefore, the Court finds that the settlement is fair.

ii. Class Notice

The content of a class notice is subject to court approval.

If the court has certified the action as a class action, notice of the final approval hearing must be given to the class members in the manner specified by the court.

(Cal. Rules of Court, rule 3.769(f).)

The notice generally complies with the requirements for class notice. (Declaration of Liza Cristol-Deman in Support of Joint Motion for Preliminary Approval of Settlement and Class Notice, Exhibit 2.) It provides basic information about the settlement, including the settlement terms, and a summary of the trial, verdict, and judgment. On page five, however, the notice states that a class member can object to the settlement by attending the hearing, submitting an objection in writing at least 14 days before the hearing, or both. The notice should be modified to state that objections that are submitted in writing must be received by counsel and the Court no later than one day before the hearing.

In sum, the motion for preliminary approval of class action settlement is GRANTED subject to the modification to the notice.